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The New Year Rings in New Requirements for NFA Member Asset Managers

In the final weeks of 2018, the National Futures Association (“NFA”) issued new requirements applicable to asset managers who are members of the NFA that will take effect in 2019. First, the NFA amended its Interpretive Notice 9070, “NFA Compliance Rules 2-9, 2-36 and 2-49: Information Systems Security Programs” (the “Cybersecurity Notice”). The amended Cybersecurity Notice adds an NFA notification obligation, employee training requirements, and specific approval procedures to the written information systems security program (“ISSP”) required of each NFA member firm (a “firm”) under the original Cybersecurity Notice issued in 2016. In addition, Interpretive Notice “NFA Compliance Rule 2-9: CPO Internal Controls System” (the “Internal Controls Notice”) requires commodity pool operator (“CPO”) members to establish a system of internal controls and provides guidance on designing and implementing such controls. The Cybersecurity Notice will become effective on April 1, 2019 and we expect the Internal Controls Notice to be effective on April 1 or soon thereafter.

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Reminder Regarding Upcoming FATCA Deadline and Implications for Trading Agreements


Time to Read: 1 minutes Practices: Hedge Funds, Investment Management, Private Investment Funds

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The effective date under the Foreign Account Tax Compliance Act (“FATCA”) for withholding agents to begin withholding on certain U.S. source payments made to foreign financial institutions (“FFIs”) and non-financial foreign entities (“NFFEs”) is July 1, 2014 (absent further extension). Generally, FATCA imposes a 30% withholding tax on certain U.S. source payments made to FFIs and NFFEs unless the recipients of such payments qualify for an exemption from FATCA or comply with certain information, diligence, reporting and/or withholding requirements that are mandated by FATCA. Under many forms of trading agreement, including ISDA Master Agreements, if FATCA withholding occurs on a payment, the payor is required to gross up the recipient for such withholding. Because the recipient (and not the payor) is the party that has the ability to prevent FATCA withholding taxes by complying with FATCA rules, parties should consider amending any affected trading agreements in advance of the July 1 deadline to ensure that the recipient (payee) bears any burden of FATCA withholding taxes. Such amendments can be made by both parties to an agreement becoming adhering parties to the ISDA 2012 FATCA Protocol or by a fund entering bilateral amendments with its trading counterparties.
 
For more information regarding FATCA, please contact the Ropes & Gray attorney who usually advises you. 
 
 
Circular 230 Disclosure: To ensure compliance with Treasury Department regulations, we inform you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. tax-related penalties or promoting, marketing or recommending to another party any tax-related matters addressed herein.

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